Abbott Makes Play for Bigger Piece of India’s Pharma Market

Developing countries like China — particularly their middle classes — are growing so rapidly that big drug makers facing diminishing returns in the U.S. and Europe are targeting the emerging markets for a big chunk of their future growth.

Abbott’s announcement today that it’s acquiring an Indian pharmaceutical business is the latest evidence of this push into developing countries. And the deal’s details suggest how big brand-name drug makers will have to adjust their ways to adapt to these different markets.

Abbott is paying $3.7 billion for the drug-making business at India’s Piramal Group. That unit sells more than 350 antibiotics, heart drugs, painkillers and other drugs across India.

Abbott already had a decent-sized operation in India, with more than 2,500 employees. The company says the Piramal deal will catapult it into the leading position in the fastest-growing segment of India’s pharmaceutical business: branded generics.

“When we look at growth opportunities in emerging markets, we want to be in India and we want to be in branded generics,” Mike Warmuth, who heads Abbott’s established products business, a new unit dedicated to overseas markets that has $5 billion in yearly sales, tells the Health Blog.

As the name suggests, branded generics are not your typical patent-protected brand-name blockbuster. Rather, they’re a cross between brand-name drugs and their more affordable copycats. The products are a good fit for the rising middle classes in places like India who pay attention to brand but can’t afford the high prices of Western brands.

For that reason, Big Pharmas like Pfizer, GlaxoSmithKline and Sanofi-Aventis have also been bolstering their branded generics businesses overseas. They and (mostly) generic drug maker Teva have been jockeying to acquire assets. The steep price for Primal suggests Abbott faced competition, Credit Suisse’s Catherine Arnold said in a note to investors.

Once it digests Piramal, Abbott says it will have a 7% market share in India. Abbott expects the country’s pharmaceutical market, worth nearly $8 billion now, to double by 2015.

Comments (1 of 1)

Drug manufacturing and sales abroad are clearly great for American pharmaceutical companies. Let's just hope that the American market can still incentivize drug development at the level of innovation, research, and development, so that these companies don't haul themselves out of the American economy completely.